With roots in public TV, the producers of Reading Rainbow found the private-sector market can be a beast, even in kidvid

Revised version of story from Current, February 16, 1998

Cecily Truett and Larry Lancit rolled the dice. In the spring of 1991, they took their production company and its best known product, and laid them at the feet of GKN Securities Corp., a small investment firm, which organized the initial public offering of their production company.

By then, the Lancits had filled a trophy case with awards as producers of Reading Rainbow. But Lancit Media Productions’ earnings were barely enough to scrape by. It was certainly not enough to expand. Not enough to invest in future projects. Not enough for retirement. After years of constant funding struggles and hand-to-mouth existence, the odds of Wall Street looked good.

And Lancit looked good to Wall Street. Especially after the marketing success of Barney & Friends, investors stampeded to the company on the prospect that their new show, made with KCET in Los Angeles, Puzzle Place, would be the next big thing. As one euphoric analyst counseled investors in a July 1993 issue of Crain’s New York Business: “Buying Lancit now is like buying Henson stock before Sesame Street came out.”

During a premature frenzy over licensing deals with toy companies, Lancit stock skyrocketed from $4.50 to $16.50 a share when the show finally debuted in January 1995. After that, the products didn’t sell fast enough. A traveling ice show never hit the road. The Puzzle Place supercenters never opened. And investors fled.

By February 1996, Lancit was selling at $2 a share, according to Truett.

Ray Jansen, an analyst with GKN, recently looked back at the company’s wild ride. “They had some success with like — what was it, The Rainbow Room? Reading Room? Hey, what was the name of that show? What was it? Oh, yeah, Reading Rainbow. That was it — Reading Rainbow,” Jansen said. “But how do you license the Reading Rainbow thing? I’m all for public broadcasting, but there’s a big difference between what you want to call artistic or critically acclaimed success and what you call a commercial success. It may be instructive, incisive and insightful, but that don’t mean it sells. Look at Barney. He’s kind of cutesy, kind of funsy. He certainly doesn’t hold a candle to Puzzle Place, but he’s simplistic, and kids identify with it.”

“A difficult place to be”

In 1991, the Lancits had perceived an expanding market for children’s educational programming. The previous year, Congress had given commercial TV a gentle push with the Children’s Television Act (and in 1997 the FCC would give a bigger push with its three-hours-a-week minimum). Cable channels also created more venues for children’s “edutainment” programming, though the networks were making some of those shows in-house rather than hiring indies like Lancit.

“The independent companies have either gone away, or become part of a larger company, or gotten really, really, really big — and I think you need to be in one of those places,” said Susan Solomon, a former Sony executive and corporate builder who took over Truett’s job as Lancit c.e.o. in April 1997. “Or you could be tiny. You could be really, really tiny, and be a mom-and-pop and sort of go back to the way this company was 17 years ago. But I think in the middle is a difficult place to be.”

The company recently has even had conflicts with PBS over its original product. Talks between the network and the Reading Rainbow team — Lancit and the series owners, Great Plains National (GPN) and WNED, Buffalo — fell apart over PBS renewal funding and ancillary product revenues. And the producers let it be known they would consider taking the series to a cable network. After an outcry from public TV stations, however, the producers and PBS are negotiating again over the series’ future. Parties to the talks declined to discuss details of the dispute.

In the meantime, Lancit teeters on the brink of another breathtaking plunge as it actively seeks a merger partner.

Former WNED General Manager Mike Collins, who figured prominently in the early days of Reading Rainbow, commented as he cleaned out his office, heading for retirement: “It’s unfortunate when you’ve got something that fills a special niche — something that is valuable educationally — when those programs have to play in the marketplace,” he said. “That very marketplace is the thing that forces programs of the sort we say we are all about, out of our schedules. That’s extremely unfortunate.”

Now more than ever, founders Cecily Truett and Larry Lancit are face to face with the crushing competition of multimedia conglomerates, far from their earlier years in public TV. “Am I worried?” asked Lancit, the company’s co-president alongside Truett, sipping wine as he considered the prospect of abdicating control of the company to some cable giant. “Yeah, every day. But I’ll cross that bridge when I get there.”

Truett, on the other hand, gives the unmistakable impression that Lancit Media could survive by the sheer force of her relentless drive. “There is nothing that can sustain the energy, the commitment that is required to bring a company to this point, other than the passion for the work and the belief that that work can generate economic value in the market,” she said. “I couldn’t feel this way about selling deodorant. You have to believe from the bottom of your heart in what you’re doing.”

“Radical outlaws for quality and good”

Even as a little girl, Cecily Truett knew, without question, that she would make it in TV. She remembered her father bringing her and her five brothers and sisters to the local radio station of a small Massachusetts town, where he sold advertising time. “We were the talent. My mother would write the ads, and we would go into the studio and do the tracks,” she recalled. “I just loved it. I loved the buttons, I loved the lights, I loved the microphone, I loved hearing myself on the radio. I loved it, I loved it, I just loved it. And I just thought, what could be better?”

Truett graduated from Winthrop College in Rock Hill, S.C., with an English degree, and from the University of South Carolina with a master’s in journalism. She landed her first job at South Carolina ETV in 1974. It was a time of relatively robust federal funding, when public TV had begun to distinguish itself with new shows like Masterpiece Theatre, and a new generation grew up on Sesame Street and Mister Rogers.

“There was a tremendous sense of mission about public TV,” said Truett. “But I didn’t care what kind of television I got into. I wanted to be in television of any kind. I wanted to make it. I didn’t care where it was. I didn’t care what I got paid, I didn’t care what I had to do. I was avid to do it.”

Larry Lancit came to South Carolina from the University of Miami, where he worked as a cameraman shooting instructional videos for the medical school. At South Carolina ETV, Lancit directed the live nightly news program. “I was really interested in public TV because I felt it was mission-driven,” said Lancit. “It wasn’t governed by the constant search for commercial money. I was a young idealist, I felt at home there.”

Truett was hired as an SCETV production assistant by Jayne Adair, now head of marketing and development at WQED, Pittsburgh. She was then producing an innovative magazine-style program for children, called Studio See. Its producers were the first to take Sony three-quarters-inch video equipment out of the studios and into the field. “It was a time that public TV was doing the best children’s programs being done,” said Adair. “Zoom was on, Rebop was on, and so we really had the feeling that we were in the right place at the right time.”

Studio See broke ground in terms of content as well, bringing together young writers and producers and giving them the freedom to try new things.

“The people who were programming in public TV had a sense of start-up,” Truett said. “A sense of excitement, a sense of mission, a sense of being radical outlaws for quality and for good and for mission-based programming and intelligence and tremendous creative freedom to bring the passion of quality and content and craft to the audience. And that was a wonderful time. A wonderful time.”

Commercial TV was never a consideration for Studio See, said Adair. The networks at the time were running cartoon spinoffs of the Jackson Five and the Osmond Brothers. “None of us knew what was happening then, but we were creating an educational environment,” she said. “You just lived and breathed shows like this. You worked 18 hours a day, and had a ball. We just knew that that was going to be the best job in TV we would ever have in our careers.”

Truett hardly knew Lancit at the time, though he was working down the hall, producing national shows including Firing Line with William Buckley and programs for Great Performances. In his free time, he went skiing and boating with his best friend, Philip Gay, now a freelance producer for public TV in Boston. “I suppose he was a little more entrepreneurial than me,” said Gay. “He always had a vision to be his own boss — I kept on the PBS track.” Gay chuckled as he reflected on the different paths that he and his friend chose. “I don’t know if I have that in me. Ultimately, that would be a nice way to run your life — to have total control. I have to give Larry credit for doing that.”

Although it has been a while since Gay talked with Lancit, he recalled having lunch with him a few years back. “His stock had just gone up to about $4. He said, ‘You know, you might check it out and buy a couple of shares.’ So, I bought some. Then it went up to $13 or $14. My family needed the money, so I liquidated.” Within a few months, the stock price was plummeting.

Lancit had left South Carolina in 1975, and Cecily Truett was not far behind. After a five-year run, the last three of which were national, Studio See ended in 1979. By that time, funding had become more difficult, Adair said, and it was getting hard to keep the staff together. Adair herself left to produce a nightly magazine program — a predecessor of P.M. Magazine — at a commercial station in Pittsburgh. Other South Carolina producers also have left to make programs elsewhere: Hugh Martin went on to make a series for Nickelodeon, and James Steinbach to produce Newton’s Apple at KTCA in Twin Cities. “No one thought they could sustain [Studio See],” said Adair. “And there was no attempt to keep it alive.”

Truett moved to New York temporarily, or so she thought, to organize a symposium on books and broadcasting for children. On a bleak, rainy April day, dreaming of South Carolina azaleas and hating the city, Truett took the advice of a friend, and called Larry Lancit, who had been producing medical instructional videos from his office on Columbus Circle — across the street from Truett’s own office.

“He had been dating one of my friends on Studio See,” Truett recalled. “So I knew who he was, but I had never had lunch with him. So, as our lunch progressed, I thought he was wonderful, and at the end, he asked if I wanted to go out Saturday night.” The two fell in love, formed a private company, got married and haven’t left New York City since.

Their first business was producing medical videos out of Lancit’s two-bedroom apartment on the Upper West Side. “We really went out on a limb big-time and bought an IBM Selectric typewriter and had stationary made,” said Truett, recalling their lean early years. She would answer business calls in a fake secretary voice to keep up appearances. Their first big break was Reading Rainbow, a series based on children’s books conceived by WNED’s Tony Buttino and Great Plains National’s Twila Liggett, and endowed with the educational expertise of Virginia Biggy.

Buttino had admired Truett’s work on Studio See, and called her about working on Reading Rainbow. “Cecily was so enthusiastic over it,” Buttino recalled. “It was kind of overwhelming.” After Liggett met with the Lancits, the team was set.

“When we first started talking about Reading Rainbow,” Liggett said, “Cecily and Larry created pictures in your mind of what that would look like on screen in a way that I recognized immediately that that would work. It was an absolute coming together of the right people.” In 1981, the team took their funding proposal to CPB, which was soliciting instructional programs for classrooms.

“It was a high-risk idea,” said Mary Sceiford, a longtime CPB children’s programming executive. “Reading Rainbow was never designed for the classroom. It was a summer series. But at that time there was no competition for anything of that nature. So they came up a winner. All they had was a demo tape, with Truett and Biggy talking about how they would design it with no example of how it would actually look.” They were funded for a pilot, followed by a grant of $60,000 for their first season. Kellogg’s Co. anted up another $60,000, and the initial season of 15 shows, produced in New York City, premiered in 1983. WNED and GPN still own the show, and Buttino and Liggett are co-executive producers with final say over content and any ancillary product sales. Lancit recently acquired 10-year licensing rights to the Reading Rainbow name.

Reading Rainbow host LeVar Burton meets a frog at the library.

Reading Rainbow gave the Lancits a fee and a good name as producers of children’s programming. With production in full swing, the company expanded its offices. “We took a sleazy little apartment on Riverside Drive with a view of the river,” said Truett. As the show grew and the budgets balanced, the couple busted through the wall and took over the apartment next door. Soon thereafter, they found office/postproduction space on 11th Avenue and 51st Street, an old ribbon factory. “We liked the metaphor, liked the open space. It was full of dead pigeons, broken glass, windows, hunks of old ribbon machines, and we said, ‘Oh, this is wonderful. We’ll take it.'” An architect friend revamped the sixth floor and created windows with views of the Hudson River.

The space today looks like a school library: hardwood floors, exposed brick walls and ceiling beams, a huge, open, rectangular space partitioned with low, two-shelf bookcases packed with thin children’s books. A trophy case stuffed with Emmys, Ollies, and other awards testifies to the success of Reading Rainbow, and to a lesser degree, Puzzle Place.

Truett’s office, across the hall from her husband’s, is packed with prototype merchandise from Puzzle Place. Her bookshelves are lined with Puzzle Place dolls, and stuffed animals from other projects like Backyard Safari, a series that Lancit had been trying to sell. Behind her desk, above the bookshelves is a sign that reads “Conan” — the rest of the title, “the Librarian” — a Lancit special that starred Tyne Daly. Lancit’s office is streamlined by comparison. A video screening system is built into his bookshelves. One Puzzle Place doll is propped in a leather chair in the corner.

There was a sense of family among the handful of employees who moved into the new 11th Avenue space, which eventually expanded to include state-of-the-art Avid editing equipment down the hall. “The other sense of it was a real belief in the importance of public TV in that whole scheme of things,” said Truett. “We felt that we were doing something important, and there was a real sense of privilege about access to children’s minds.”

The co-presidents describe their decision to go public slightly differently, perhaps a reflection of their respective roles in the company. Truett tended to develop ideas (Puzzle Place was largely her creation) and was the company’s c.e.o. until Solomon took over last April. Lancit has been the chief executor of those ideas, overseeing production of all the company’s shows. “What we saw in the marketplace,” Truett explained, “was suddenly with the proliferation of distribution avenues for television product — cable, the Internet, interactive technology. Suddenly, in a relatively short period of time — guess what! — I’m a consumer with some choices here. I want my child to have some intelligent stuff to watch, and I’m going to pay to have that in my house.”

Truett saw that networks weren’t trying to serve those parents, and saw an opportunity for Lancit. “Consumer dollars were being spent, and market share was being developed in intelligent content. Enter Lancit Media.”

Larry Lancit described another aspect of the decision. “We had basically been producers-for-hire,” he said. “We were making a living, but we couldn’t grow and didn’t have money to buy other properties or invest. It wasn’t enough to have something for the future, and we said we’re getting older. Are we going to do this ’til we’re 55 and then drop dead of a heart attack?”

An investment banker who became the company’s financial chief helped organize the company’s initial public offering, along with GKN Securities. “At the time,” recalled Lancit, “this young man, Gary Stein, said, ‘I can help you raise money’ and he made it sound so easy. And a year-and-a-half later, we were in the throes of a public offering, and we had lawyers, and, you know, it became a much more complicated thing.”

The initial public offering, in June 1991, raised $2 million in capital. Unlike many within public TV, Truett was never squeamish about selling products associated with children’s TV. “Every producer of every TV program must, must consider the growth of ancillary opportunities for their brand,” said Truett, of marketing products from shows. “The economics of the industry compel producers to maximize the opportunity for return. Absolutely.”

Indeed, Puzzle Place seemed to have the makings of a merchandising vehicle, with nine puppet characters, though Truett denies they were designed for selling. Before the show debuted in January 1995, Lancit Media had struck deals with toy companies and others. [Eventually the projects sold more than $20 million in merchandise, Truett said.]

CPB gave the series a $4.5 million grant, the largest in its history. Southern California Edison anted up $3.5 million of the $13 million budget. With the influx of cash, Truett and Lancit brought in executives from commercial TV, and forged movie and more TV deals. In April 1992, Lancit acquired the exclusive option to develop, produce and distribute a new live action TV series based on the comic book heroine, Red Sonja. That May, Lancit named Christie Rothenberg, a former entertainment industry consultant as v.p., operations. Three months later, Jo Ann Emmerich, former ABC senior v.p. of daytime programming, joined as executive producer for commercial family programming. In October, Sonia Rosario, former Columbia Pictures TV executive, was named supervising producer of Puzzle Place. In December, Lancit announced plans for Maniac Magee, a movie based on the award-winning children’s book. A series called Pathfinders was announced in October 1993, and in December, Lancit acquired rights to develop the popular computer game “Lemmings” as a cartoon.

None of these projects would come to fruition.

In April 1993, Crain’s New York Business predicted that Lancit’s “anticipated forays into licensing, merchandising and distribution could send revenues and stock soaring.” Crain’s quoted Larry Lancit: “Now the excitement begins.” The stock was up to $9.50 a share. In 1993, Lancit acquired the A.J. Scanlan & Co. licensing agency, bringing its president, Arlene Scanlan, on board to manage ancillary deals. Scanlan’s agency had handled licensing for the Snoopy and Garfield characters. Forty episodes of Puzzle Place were completed by August 1994. A New York Times article that month predicted Puzzle Place products would earn $9.2 million by June 1995, and $16.8 million by June 1996. By October 1994, Lancit stock reached $16.50 a share. In January 1995, Puzzle Place debuted.

The crash

Truett recalls that she saw it coming. “We always counseled a slow build on this property,” she said of Puzzle Place. “We said this is going to be a slow build. In a retail environment that is that heated, it is very difficult to manage expectations.” Indeed, the momentum was unstoppable.

Lancit still wonders why the company went public. “That’s a question we’re still asking ourselves today,” he said. “Being a public company is a very difficult challenge, because when you let ordinary people buy into your company, you are then in a position to satisfy them by showing a certain amount of profit. You’re having to deal with and fend off a whole group of people who want to know why you didn’t make that money, why did you make that deal. Their questions can be very pointed — they are interested only in one element. And that is making money.”

By February 1996, when Lancit stock had sunk to $2 a share, product sales were lagging behind expectations and the company was burning through its cash reserves. In September 1996, Discovery Communications gave Lancit a vote of confidence, buying a 6.6 percent stake in Lancit and hiring the company to develop shows for its Discovery Kids weekend line-up. One of those, based on the Outward Bound program, will be a rugged magazine-style show for kids, not unlike the 1970s hit Studio See.

Now, the company is struggling to keep three shows on the air. It’s producing five new Reading Rainbow episodes, though a shortage of funds has forced the producers to use old on-location footage in three of the five. Though PBS and the production partners are negotiating again, future funding remains in doubt.

Puppeteers Peter Linz and Alice Dinnean work on Puzzle Place.

Puzzle Place is on track. The company is shooting a new season of 10 episodes in Los Angeles. And since fall, 13 episodes of Backyard Safarihave been distributed by American Program Service and aired by about 40 public TV licensees.

Negotiations with a potential “strategic partner” are underway now and are expected to be completed by the end of March.

“I would say if Lancit had to pick,” Truett said, “the ideal partner would be a distribution partner that loves our edutainment content and wants to build a business in the edutainment area.”

That’s edutainment

The underlying forces that drove Lancit’s stock down extend well beyond a consumer’s decision to buy a Puzzle Place doll, and they touch not only Lancit but PBS and other independent producers as well.

Three factors were at work, said Solomon. First, vertical integration. As big networks began producing more programs in-house, the potential shelf-space for Lancit’s programs shrank. Second, the subsidies enjoyed by Canadian companies like Cinar, which makes Arthur for WGBH, gave them big competitive advantages. And, third, unpredictable hits like Barney & Friends left Wall Street with unrealistic expectations of producers.

Where PBS and its brand of kidvid once operated in a low-budget noncommercial oasis, they are now subject to the dynamic, unpredictable economic forces that rocked Lancit Media.

Yet Lancit Media still have good reason to seek distribution through PBS, said Alice Kahn, head of children’s programming. “There are tremendous incentives on PBS. One, we reach everybody in the country. Another, that sounds perhaps esoteric, but I think producers are artists, and in the same way a writer is an artist and a painter is an artist. They have a creative vision and an intended audience in mind. What public TV offers producers is a chance to truly realize their vision.”

The commercial buzzword “edutainment” is anathema to Kahn. “Edutainment is the stupidest word to come out of the English language. It’s what Lewis Carroll called a ‘portmanteau’ word — this cobbling together of two words that is a commercial fiction.”

At Lancit, however, the word is an economic reality, as the company’s energy turns towards cable, not unlike producers of Magic School Bus and Shining Time Station.

“As the TV business has changed and as public TV has changed and the role of independent producers has changed, there has been a real sense of turmoil,” Truett said, and then corrected herself. “There’s been a lot of dynamic — dynamic is a better word — turmoil is negative and I don’t want to be negative. It’s been a very dynamic environment.”